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Resolving Tax Disputes With Tribal Entities

Resolving Tax Disputes With Tribal Entities. Sharon I. Haensly Williams Kastner Law Seminars International Tax Management for Tribes February 21-22, 2008. Topics. Purposes of tribal taxes Tribal tax administration codes Due diligence for the non-Indian business When do you get to court?

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Resolving Tax Disputes With Tribal Entities

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  1. Resolving Tax Disputes With Tribal Entities Sharon I. HaenslyWilliams KastnerLaw Seminars InternationalTax Management for TribesFebruary 21-22, 2008

  2. Topics • Purposes of tribal taxes • Tribal tax administration codes • Due diligence for the non-Indian business • When do you get to court? • The exhaustion doctrine • What if the tribe lacks a tax administration code? • Beware of statutes of limitations • Additional suggestions for resolving tribal tax disputes

  3. Purposes of Tribal Taxes • An 1879 U.S. Senate Judiciary Committee report stated: • Tribes “undoubtedly possess the inherent right to resort to taxation to raise the necessary revenue for the accomplishment of these vitally important objects” that include maintaining peace and order, improving their condition and establishing school systems. • S.Rep. No. 698, 45th Cong., 3rd Sess., 1-2 (1879), quoted in Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 140 (1982).

  4. Tribal Tax Administration Codes • Often provide for: • A way for the tribe’s tax agency to collect the tax without going through a judicial proceeding • A process for challenging the tax • The requirement to pay the tax as a precondition to appeal • An opportunity to build the record • Formal and informal opportunities for settlement • Deadlines for administrative and judicial appeals • Slowing down the process to avoid litigation • See http://www.tribal-institute.org/lists/codes.htm

  5. Due Diligence for the Non-Indian Business • Tribes can impose taxes even if a contract with a business is silent. • Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 147 (1982) (“Contractual arrangements remain subject to subsequent legislation.”) • Non-Indian businesses should work with the tribe’s attorney and review: • Tribal constitution (if one exists) • Tribal tax codes, regulations and policies • Codes and rules governing tribal court system • Applicable state taxes • Any intergovernmental agreements that exist on taxation and enforcing judgments

  6. When Do You Get To Court?Which Court? • Answer: After you completely and thoroughly exhaust tribal administrative and judicial remedies Exhaustion

  7. Basis for Exhaustion Rule • As a matter of comity, a federal court should stay its hand until after the tribal court has had a full opportunity to determine its own jurisdiction. • The forum whose jurisdiction is being challenged (i.e., tribal court) should have the first opportunity to evaluate the factual and legal bases for the challenge. • National Farmers Union Ins. Cos. v. Crow Tribe, 471 U.S. 845 (1985).

  8. More About Exhaustion • Plaintiffs should seek all possible relief in tribal court and, once that is accomplished, seek available relief in the federal courts. • Exhaust tribal remedies even if issues of federal law are involved; if there is no pending tribal court action; and if federal defendants cannot be joined. • See, e.g., Sharber v. Spirit Mountain Gaming Inc., 343 F.3d 974 (9th Cir. 2003); Middlemist v. Secretary of the Interior, 824 F.Supp. 940 (D. Mont. 1993). But see Atkinson Trading Co., Inc. v. Shirley, 532 U.S. 645 (2001) (Supreme Court decided that tribe lacked taxing jurisdiction without mentioning exhausting tribal remedies).

  9. Exceptions to the Exhaustion Rule • The assertion of tribal jurisdiction is motivated by a desire to harass or is being conducted in bad faith; • Futility, where there is no functioning tribal court system to challenge jurisdiction; or • The action patently violates express jurisdictional prohibitions.National Farmers Union Ins. Co. v. Crow Tribe, 471 U.S. 845 (1985).

  10. Federal Jurisdiction Over Tribal Tax Cases Is Limited • Federal courts will not relitigate the merits if the tribe has jurisdiction. • Federal courts may determine de novo, as a matter “arising under” federal law, whether a tribe or tribal court has exceeded the limits of taxation jurisdiction over non-members. Those contesting tribal jurisdiction must show that federal law has curtailed the tribe’s powers. • See 28 U.S.C. § 1331; Duncan Energy Co. v. Three Affiliated Tribes of the Ft. Berthold Reservation, 27 F.3d 1294, 1300 (8th Cir. 1994); National Farmers Union Ins. Companies v. Crow Tribe,471 U.S. 845 (1985).

  11. Standard of Review in Federal Court • “[T]ribal courts are the best qualified to interpret and apply tribal law.” • Federal courts afford deference to tribal court’s determinations of tribal law. • Federal courts defer to tribal court’s determination of fact unless clearly erroneous. • Iowa Mutual Ins. Co. v. LaPlante,480 U.S. 9, 16 (1987); Duncan Energy Co. v. Three Affiliated Tribes of the Ft. Berthold Reservation, 27 F.3d 1294, 1300 (8th Cir. 1994).

  12. If a Taxpayer Goes to Federal Court First, Does the Federal Court Dismiss or Stay the Case Pending Exhaustion of Tribal Remedies? • That decision is left to the federal district court’s discretion.National Farmers Union Ins. Companies v. Crow Tribe,471 U.S. 845, 857 (1985). • A stay is the usual remedy. Federal courts usually stay actions pending exhaustion of tribal remedies, particularly if dismissal would result in the running of the statute of limitations. • Booppanon v. Harrah’s Rincon Casino & Resort, No. 06-1623, 2007 WL 433250 (S.D. Cal. 2007); Farmers Union Oil Co. v. Guggolz, No. 07-1004, 2008 WL 216321 (D.S.D. 2008); Sharber v. Spirit Mountain Gaming Inc., 343 F.3d 974 (9th Cir. 2003) (Ninth Circuit stayed the case, recognizingthat the district court’s (erroneous) dismissal could mean that Sharber would later be “barred permanently from asserting his claims in the federal forum by the running of the applicable statute of limitations.”). • Dismissal may occur. Elliott v. White Mountain Apache Tribal Court, 2006 WL 3533147 (D.Ariz. 2006) (dismissed where the plaintiff had identified no prejudice resulting from dismissal, and could properly challenge jurisdiction once the matter was ripe for federal district court jurisdiction).

  13. What If the Tribe Lacks a Tax Administration Code? • Consider: • Contracting for a detailed dispute resolution process that addresses due process and allows for creatively settling disputes. • A recent Ninth Circuit decision indicates that a sovereign immunity waiver may be unnecessary if the taxed business only seeks prospective relief against the tribal official(s) responsible for enforcing the tax and alleges an ongoing violation of federal law. See Burlington Northern & Santa Fe Railway Co. v. Vaughn, 509 F.3d 1085 (9th Cir. 2007).

  14. In Return, the Tribe May Seek Agreement On Tax Enforcement Issues, Including: • Agreeing to tribal court jurisdiction; • Agreeing to processes for enforcing the tribal tax on the reservation; and • Agreeing to processes for enforcing the tribal tax off-reservation. Each state has different rules for recognizing and enforcing tribal court judgments. • See Taylor, Scott, Enforcement of Tribal Court Tax Judgments Outside of Indian Country: The Ways and Means, 34 New Mexico Law Review 381(2004).

  15. During Any Tax Challenges, Keep Your Eye On Statutes Of Limitation

  16. Statute Of Limitations Concerns • Statutes of limitations in one forum may run during a challenge in the other forum. • Tolling agreements may not be enforceable. • Taxpayer with a jurisdictional issue may need to protectively file in federal court and seek a stay if there are statute of limitations concerns.

  17. Does Filing A Lawsuit In One Court Toll The Statute Of Limitations In Another? • Possibly, but not necessarily. • Courts may apply the doctrine of equitable tolling, where a litigant has several legal remedies and pursues a remedy in good faith in another forum. 54 C.J.S. Limitations of Action § 128. • In an older decision, a federal court ruled that filing a federal lawsuit should toll the statute of limitations for a tribal claim in tribal court. The federal court implicitly recognized that it could not control the tribal court’s decision. Accordingly, it held that if the tribal statute of limitations had run and the tribal court would not hear the suit on the merits, then the federal district court would entertain the merits of the suit. O’Neal v. Cheyenne River Sioux Tribe, 482 F.2d 1140 (8th Cir. 1973).

  18. Can Parties Agree To Postpone the Running Of a Statute Of Limitations On a Tax Claim? • They can, but not all courts recognize tolling agreements. • See, e.g., First Annapolis Bancorp, Inc. v. United States, 54 Fed. Cl. 529, 539-540 (2002) (rejected the tolling agreement as having no legal effect because the statute of limitations is jurisdictional in the Court of Federal Claims). • A court may look to tribal law to determine enforceability of a tolling agreement that is signed on the reservation. State courts often look to state law to determine whether a tolling agreement is enforceable. For example, Texas law requires that tolling agreements be for a "reasonable" or a "pre-determined length of time." See, e.g., American Alloy Steel, Inc. v. Armco, Inc., 777 S.W.2d 173, 177 (Tex. App. 1989) (refusing to toll the statute of limitations where a general waiver provision neither provided a reasonable amount of time for tolling the limitations period nor specifically addressed limitations).

  19. Additional Suggestions For Resolving Tribal Tax Disputes • Recognize the tribe’s need to fund governmental services. • Offer creative contributions that will bolster the reservation community and economy. • Do not assume that you will not get a fair hearing before the tribe’s tax agency or tribal court.

  20. Resolving Tax Disputes With Tribal Entities Sharon I. HaenslyWilliams KastnerLaw Seminars InternationalTax Management for TribesFebruary 21-22, 2008

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